Action Energy Inc. announced drilling success on its Lake Alma Midale play about 100 km south of Regina Saskatchewan. The Company has drilled, completed and equipped the exploratory well for production and is currently production testing the well. Interpretation of the well log and surrounding oil shows suggests that the discovery well may contain an oil column in excess of 40 metres.
Action has 6 contiguous sections (3,840 net acres) of land at 100% working interest surrounding the discovery well and, based on 3-D seismic interpretation, the Company has identified several additional drilling locations prospective for Midale light oil production. This discovery well is eligible for a fixed Crown royalty rate of 2 1/2 percent on the first 100,000 barrels of oil production and further development wells are eligible for the same royalty rate on the first 50,000 barrels of oil production. Follow up drilling is anticipated to commence immediately after spring breakup.
In other southeast Saskatchewan developments, Action Energy has entered into a joint venture agreement with a private land acquisition fund (the "Land Fund") for the acquisition of Bakken mineral rights in southeast Saskatchewan. The essential terms of the agreement provide for the Land Fund to acquire Crown and freehold mineral rights land parcels based on geological mapping and technical input from Action's management team. Upon successful acquisition of a land parcel, Action would then have a two year exclusive right to earn a 100% working interest in all of the lands in the parcel by drilling a single exploratory Bakken well (the "Earning Well"). After Action drills the Earning Well, the Land Fund retains a non-convertible 5% - 15% sliding scale overriding royalty on all of the lands in the parcel.
At the February 11, 2008 Saskatchewan Crown land sale, the Land Fund was successful in acquiring 11 net sections of contiguous Bakken mineral rights south of the main Viewfield Bakken field. In addition, Action has successfully acquired 5 net sections of Freehold Bakken rights immediately adjacent to the Crown lands acquired by the Land Fund. These activities have provided Action with a contractual right to a total of 10,240 net undeveloped acres in an area that is prospective for Bakken light oil production. Action expects to drill the Earning Well for this land parcel in June 2008. The well will be an exploratory horizontal well and it is anticipated that the well will be completed using the same interval fracture stimulation technique that has worked successfully in other Bakken horizontal well completions in southeast Saskatchewan. If the well is successful, Action would qualify for a fixed Crown royalty rate of 2 1/2 percent on the first 100,000 barrels of production on each horizontal well drilled in the area. With success, under full development at 4 wells per section, there would be the potential for Action to drill a total of 64 gross Bakken horizontal wells on the Crown and Freehold lands acquired to date.
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